Venture Philanthropy at Work

from Do Hyun Kim

Venture philanthropy is more than charitable contribution or redistribution of wealth to society.  Venture philanthropy is a goal oriented approach for specific social impacts with the applications of concepts and techniques from venture capital finance.  The aim of venture philanthropy is to build organizational systems and capacity focused on achieving lasting outcomes for specific area of interest.  It requires high level of involvement of donors with their grantees to ensure that their capital contribution is effectively utilized to achieve progressive results toward specific philanthropic goals over long term.  Venture philanthropy can effectively fill in the gap where the society desperately needs for common good such as cancer research, cultural landscape, education, and other social infrastructure.  The concept of venture philanthropy is also called “philanthrocapitalism” because philanthropists are actively investing their money to make the greatest possible difference to society’s problems: in other words, to maximize their “social return” (The Economist, 2006).

 

Eli Broad is an excellent example of effective venture philanthropist.  Eli Broad founded two successful companies, one in homebuilding (KB Home) and the other in retirement insurance (SunAmerica).  Upon his retirement in 1999, he and his wife established the Eli and Edythe Broad foundation, whose mission is to “advance entrepreneurship for the public good in education, science, and the arts” (Eli Broad). He has transformed the cultural landscape of Los Angeles with his love of the arts and his financial expertise.  His contributions were given to various L.A. organizations including, but not limited to Walt Disney Hall, Museum of Contemporary Art, Los Angeles Opera, and Los Angeles County Museum of Art.  He has also donated millions of dollars to Broad Art Center at UCLA, Eli and Edythe Broad Art Museum at Michigan State University, and a state of art music and performing arts center at Santa Monica College (Eli Broad).  These notable accomplishments are tangible infrastructures, which have created lasting cultural enrichments and experiences shared with general public populations.  His involvements with the communities also expand into urban education reforms with the partnership of mayors and administration officials as well as the biomedical research through the Broad Institute of MIT and Harvard (Eli Broad).

 

In areas of urban education reform, he has partnered with local government officials and super intents for the educations to make improvements of public education through better governance, management, labor relations and competition.  In 2007, his foundation has joined forces with Bill and Melinda Gates foundation pledging a joint $60 million to create Strong American Schools. A nonprofit project responsible for running Ed in 08, an information and initiative campaign aimed at encouraging 2008 presidential contenders to include education in their campaign policies (Eli Broad).

 

According to Eli Broad, he runs his foundation like a for-profit business, not a charity.  He said, “Charity is just writing checks.  We don’t give it away, we invest it and we want return.  Remember, I started working as a CPA, so that gave me fiscal discipline in everything I did in business.  I guess some of it carries over to philanthropy” (Eli Broad).  He is known to be a “control freak” among his colleagues and he has been very engaged on how his money is put to use through his foundation.  He has driven his foundation to become more judicious and focused in pursuit of specific measurable returns on their investment (Getting Personal: Eli Broad steps up ‘venture philanthropy’, 2009).

 

His model of venture philanthropy is forged with the application of for-profit business practices and enforcements of a high level of fiscal disciplines, operational effectiveness, and promotion of growth for the benefits of the society.  These characteristics are distinctively differentiated from traditional philanthropy or venture capital.  It is the best combination of both concepts.  He has pursued measurable returns for specific objectives through his investments and he has hand delivered significant social impacts where he has actively engaged on how his funds are utilized to maximize social returns over long term.  He has focused on constructing and reforming infrastructures for lasting outcomes rather than funding pet programs, where local governments or corporate philanthropists have struggled to deliver.  His approach has proven to be very effective, but it has been very risky and challenging for him to break the norms and reform status quo. He has learned to partner with local communities, governments, schools, and other foundations to expand its scope of social entrepreneurship and the scale of social benefits to the public populations.  He has become a model of venture philanthropy where he has stepped up to the challenges with enthusiasm and extraordinary approaches for the long term benefits of social communities.

 

Getting Personal: Eli Broad steps up ‘venture philanthropy’. (2009, Nov. 20). Retrieved from Broad Center: http://www.broadcenter.org/residency/newsroom/full/getting-personal-eli-broad-steps-up-venture-philanthropy

Eli Broad. (n.d.). Retrieved from Wikipedia: http://en.wikipedia.org/wiki/Eli_Broad

The Economist. (2006). The business of giving.

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One thought on “Venture Philanthropy at Work

  1. tlhill2012 November 24, 2012 at 5:58 PM Reply

    Do Hyun – thanks for this post. I’d be interested in learning more about Broad’s strategy and measures. It LOOKs like he’s been quite thoughtful about supporting the entire arts segment in LA, and it SOUNDS as if he took a very business-like, measurement-intensive approach. This combination is inspiring and, seemingly, more effective than more scattershot approaches. At the same time, there are few foundations or nonprofits that would admit to maintaining a LOW level of fiscal disciplines, operational effectiveness, and promotion of growth for the benefits of the society. In fact, most would argue that, due to limited resources, they are more careful than most for-profits…and there is some evidence of this. My guess is that Collins of Good to Great fame is right: There are few organizations, whether nonprofit or for-profit, that are truly disciplined, measurement-oriented, strategic and generally on the path to greatness. These are the ones we should emulate – and perhaps Broad fits this category.

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